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143361

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SECOND DIVISION

G.R. No. 143361 February 9, 2006

PAULO BALLESTEROS, Petitioner,

DECISION

CORONA, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the July 15, 1999
decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 46065 which affirmed the decision of the Regional Trial
Court (RTC) of Iriga City, Branch 37, in Civil Case No. 2917.

The property subject of this petition is a two-door, three-story commercial building and the 229 sq.m. parcel of land
on which it stands. The property was originally owned by Ruperto Ensano, as evidenced by TCT No. 6178.
Ownership was subsequently transferred to the Development Bank of the Philippines (DBP) which, in turn, sold the
property to Dr. Rodolfo Vargas in a deed of absolute sale dated March 30, 1988. Despite these transfers of
ownership, however, the property was registered in the names of DBP and Dr. Vargas (TCT Nos. 941 and 942,
respectively) only on February 21, 1996.

Meanwhile, on March 14, 1991, petitioner entered into a contract of lease for one door of the building with Ronald
Vargas, son of Dr. Vargas, who represented himself as the absolute owner of the property. Under the agreement
(which was not registered in the Register of Deeds), the lease was to run until April 1, 1996.

On September 27, 1995, Dr. Vargas sold the property to respondent. This was evidenced by a deed of absolute sale
of even date. TCT No. 949 in the name of the respondent was subsequently issued on April 10, 1996.

In the meantime, on October 30, 1995, petitioner entered into a new contract of lease with Ronald Vargas who again
misrepresented himself as the absolute owner of the property. This new agreement extended the term of the original
contract of lease between the parties and included the remaining door of the building in its coverage. It was to be
effective for a period of five years from November 1, 1995, or until November 1, 2000.

Since respondent had not yet taken possession of the building, petitioner immediately occupied the additional door
upon the execution of the new contract of lease. He made advance payments for the rent of the two doors until June
1997. He also sought to register the new contract of lease with the Register of Deeds of Iriga City. However, the
contract was entered only in the primary book because it could not be registered for several reasons: (a) the
requisite tax had not been paid (b) the contract lacked a documentary stamp and (c) the tax declaration of the
property was not in the name of the lessor.2

On April 30, 1996, petitioner received respondent’s April 25, 1996 letter demanding that he vacate the property and
surrender its possession. On June 20, 1996, petitioner received another letter from respondent’s counsel reiterating
the demand for him to vacate the property. All this notwithstanding, petitioner refused to vacate the premises.

On September 4, 1996, respondent filed a complaint for unlawful detainer with damages against petitioner in the
Municipal Trial Court in Cities (MTCC) of Iriga City, Branch 2. It was, however, dismissed for failure to state a cause
of action.
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On appeal, the RTC of Iriga City, Branch 37, reversed the decision of the MTCC and ordered petitioner to vacate the
property and surrender its possession to respondent. Petitioner was also ordered to pay respondent ₱50,000 as
attorney’s fees and ₱7,000 per month as rental for the property from September 1995 until petitioner vacated the
premises. Petitioner moved for a reconsideration of the RTC decision but the motion was denied.

On respondent’s motion, the RTC issued a writ of execution dated December 1, 1997.3 It was received on
December 3, 1997 by petitioner’s wife. Petitioner filed an urgent motion for time to vacate the premises4 and a
supplemental motion for time to vacate the property,5 praying for thirty days from December 5, 1997 (the deadline
given by the sheriff for petitioner to leave the premises) within which to vacate the property. On December 9, 1997,
the RTC denied petitioner’s motion and directed the sheriff to immediately effect the restitution and delivery of the
property to respondent.

The sheriff filed a manifestation with motion dated December 9, 19976 praying that the use of force to implement the
writ of execution be allowed in order to open the premises and deliver its possession to respondent. On the other
hand, petitioner moved for a reconsideration of the December 9, 1997 order of the RTC as well as for the
suspension of the implementation of the writ of execution.

Acting on the sheriff’s manifestation with motion and the petitioner’s motion for reconsideration and/or suspension of
the implementation of the writ of execution, the RTC, in an order dated December 11, 1997, denied petitioner’s
motion and allowed the sheriff to execute the writ pursuant to paragraph (c) of Rule 39, Section 10 of the Rules of
Court.

As authorized by the trial court, the sheriff forced open the main entrance of the building and delivered possession
of the property to respondent on December 15, 1997.7

Petitioner filed a petition for review with the CA. It was docketed as CA-G.R. SP No. 46065. On July 15, 1999, the
CA affirmed the RTC decision with modification. The CA ruled that petitioner’s right of possession to the property
was only by virtue of the second lease contract dated October 30, 1995 between petitioner and Ronald Vargas. It
was clear, however, that Ronald Vargas was not the owner of the property and therefore had no right to lease it out.
Petitioner himself admitted respondent’s ownership of the property. Neither was there any evidence that Ronald
Vargas had been authorized by respondent or even by Dr. Vargas himself to transact the second lease on their
behalf.

The CA held that petitioner’s possession of the property from the date of purchase by respondent was merely by
tolerance. Such possession became unlawful from the time respondent made a demand on petitioner to vacate it.

The CA further ruled that petitioner could not pretend ignorance of the ownership of the property when he entered
into the second lease agreement. The property was registered with the Register of Deeds and such registration
constituted notice to the whole world.

However, the CA reduced the award of attorney’s fees from ₱50,000 to ₱20,000 for lack of factual basis. The CA
also took the stipulation in petitioner’s lease agreement into consideration and reduced the rent from ₱7,000 to
₱5,000 per month, and only for the period covering July 1 to December 15, 1997.

Petitioner moved for a reconsideration of the CA decision but it was denied in a resolution dated May 25, 2000.

Hence, this petition, which raises the following issues:

1. whether or not respondent could legally eject petitioner or terminate the lease;

2. whether or not respondent was able to establish a cause of action;

3. whether or not the trial court (MTCC of Iriga City, Br. 2) had jurisdiction to try the case;

4. whether or not, as ruled by the [CA], there was pretended ignorance by petitioner of the ownership of the
property;

5. whether or not the [CA’s] award of attorney’s fees was justified;

6. whether or not the implementation of the writ of execution dated December 1, 1997 on December 15, 1997
was valid;

7. whether or not respondent and the sheriffs who implemented on December 15, 1997 the writ of execution
dated December 1, 1997 (as reiterated by the RTC’s order of December 11, 1997) should be held in contempt
of court [and]

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8. whether or not the [RTC had] the jurisdiction to issue a writ for the implementation of the [CA’s] decision
when the case was originally filed with the [MTCC].8

Propriety of the Ejectment

Petitioner contends that respondent could not have legally ejected him from the premises or terminated the lease.
He claims that the two lease contracts he entered into with Ronald Vargas were valid and that contracts validly
entered into by a predecessor-in-interest should be respected by, and be binding upon, his successor-in-interest.
According to petitioner, he was not unlawfully detaining the property because the action was commenced by
respondent while the second lease contract was still in force. He insists that his good faith and honest belief that he
was transacting with the true owner should be considered in favor of the validity of the lease contracts entered into
by him.

Petitioner also invokes our ruling in Garcia v. Court of Appeals9 that the owner’s successor-in-interest must respect
an existing contract of lease. Any attempt to eject the lessee within the period of lease constitutes a breach of
contract.

Petitioner further asserts that the second lease contract was "registered" with the Register of Deeds of Iriga City,
hence respondent had notice thereof and was bound to respect it. We disagree.

The first premise of petitioner’s argument, that both lease agreements were valid, is erroneous. As correctly
observed by the RTC and the CA, Ronald Vargas was not the owner of the property and had no authority to let it.

Although the lessor need not be the owner of the property being leased,10 he should have a right (e.g., either as a
usufructuary or a lessee) or at least an authority (e.g., as an agent of the owner, usufructuary, or lessee) to lease it
out. Here, Ronald Vargas had neither the right nor the authority to grant petitioner the lease of the property.

Dr. Vargas is deemed to have ratified the first lease because he never objected to it and in fact allowed petitioner to
occupy the property for five years despite his knowledge of his son Ronald’s misdeed. Thus, we consider the first
lease valid. But the same cannot be said of the second lease. Under the principle of relativity of contracts, the sale
of the property by Dr. Vargas to respondent bound Ronald Vargas as an heir of the seller. Neither did respondent
authorize him to enter into a new lease contract with petitioner. Thus, Ronald Vargas could not have validly
executed the second lease agreement upon which petitioner now bases his right to the continued possession of the
property.

The river cannot rise higher than its source. Where the purported lessor is bereft of any right or authority to lease out
the property, then his supposed lessee does not acquire any right to the possession or enjoyment of the property.

Suffice it to say that the second lease contract was legally inexistent for lack of an object certain. Under Arts. 1318
and 1409 (3) of the Civil Code, contracts the cause or object of which did not exist at the time of the transaction are
inexistent and void ab initio.

Petitioner’s claim of good faith is of no moment. The good faith of a party in entering into a contract is immaterial in
determining whether it is valid or not. Good faith, not being an essential element of a contract, has no bearing on its
validity. No amount of good faith can validate an agreement which is otherwise void. A contract which the law
denounces as void is necessarily no contract at all and no effort or act of the parties to create one can bring about a
change in its legal status.11

Any presumption of good faith on the part of petitioner disappeared after he learned from the Register of Deeds that
the property was already registered in the name of another person. Possession in good faith ceases from the
moment defects in the title are made known to the possessor by extraneous evidence or by a suit for recovery of the
property by the true owner.12 Every possessor in good faith becomes a possessor in bad faith from the moment he
becomes aware that what he believed to be true is not so.13

When petitioner presented the second lease contract to the Register of Deeds a day after its execution, his attention
was called to the fact that the "lessor" (Ronald Vargas) whom he believed to be the owner of the property had no
authority to lease it out. From that moment, his possession ceased to be in good faith. 1avvphil.net

Petitioner’s reliance on our ruling in the Garcia case is misplaced. Garcia involved the lease of a residential unit and
was governed by a special law, "An Act Regulating Rentals of Dwelling Units or of Land on which Another’s Dwelling
is Located and for Other Purposes" (BP 25). In this case, the property involved is a commercial building, not a
residential unit. The Garcia case is therefore inapplicable.

Assuming arguendo that Garcia is applicable, petitioner’s argument would still be untenable. We held in Garcia that,
while a successor-in-interest would be in breach of contract if he were to eject a lessee of his predecessor-in-
interest during the existence of the lease, "where the lease has expired, there is no more contract to breach." Since

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the lease between petitioner and Ronald Vargas had expired on April 1, 1996, there was no existing lease contract
that could have been breached when respondent made a demand on petitioner to vacate the property on April 30,
1996.

Registration of the Lease Contract

Petitioner’s third argument is likewise without merit. Whether the second lease contract was registered or not was
immaterial since it was void. Registration does not legitimize a void contract.

Moreover, assuming for the sake of argument that the second contract could be registered, the primary entry thereof
did not produce the effect of registration. Petitioner presented the second lease contract to the Register of Deeds of
Iriga City for registration on October 31, 1995, or a day after its execution. The contract was, however, merely
entered in the primary book. It was not registered because it lacked certain requisites.

It is well settled that for the registration of voluntary instruments (e.g., deed of sale or contract of lease), it is
necessary not only to register the deed, instrument of assignment, mortgage or lease in the entry book of the
register of deeds but also for the Register of Deeds to annotate a memorandum thereof on the owner’s duplicate
certificate and its original.14 In voluntary registration, if the owner’s duplicate certificate is not surrendered and
presented or if no payment of registration fees is made within fifteen days, entry in the day book will not convey or
affect the land sold, mortgaged or leased.15

Entry alone produces the effect of registration, whether the transaction entered is voluntary or involuntary, so long
as the registrant has complied with all that is required of him for purposes of entry and annotation, and nothing more
remains to be done but a duty incumbent solely on the Register of Deeds.16 Here, petitioner admits that the second
lease contract was refused registration by the Register of Deeds for his failure to comply with certain conditions for
registration. And since petitioner failed to comply with all the requisites for entry and annotation, the entry in the
primary book did not ripen into registration.

Curiously, petitioner uses "registered" (that is, the word ‘registered’ in quotation marks) to describe his act of
presenting the lease contract to the register of deeds. This shows that petitioner himself doubted whether he had
actually fulfilled the requirements for the registration of the lease.

Petitioner also anchors his arguments against the ejectment on the second contract of lease which was inexistent
and void ab initio. But even assuming that it was valid, it already lapsed on November 1, 2000, in which case the
question of the propriety of petitioner’s ejectment would now be moot. 1avvphil.net

Sufficiency of the Allegations in the Complaint to Confer Jurisdiction on the MTCC and to Establish a Cause
of Action

Petitioner asserts that the MTCC had no jurisdiction to try the case because the complaint did not allege that he was
withholding possession of the property beyond the expiration of the lease period and that, in violation of Rule 70,
Section 2 of the Rules of Court, respondent failed to establish a cause of action by omitting to allege that demand to
vacate was made for failure to pay the rent or comply with the conditions of the contract. We disagree.

What determine the nature of the action as well as the court which has jurisdiction over the case are the allegations
in the complaint.17 In Hilario v. Court of Appeals,18 we ruled:

The settled rule is that a complaint for unlawful detainer is sufficient if it contains the allegation that the withholding
of possession or the refusal to vacate is unlawful, without necessarily employing the terminology of the law. The
complaint must aver facts showing that the inferior court has jurisdiction to try the case, such as how defendant’s
possession started or continued. Thus, the allegation in a complaint that the "plaintiff verbally asked the defendants
to remove their houses on the lot of the former but the latter refused and still refuse to do so without just and lawful
grounds" was held to be more than sufficient compliance with the jurisdictional requirements. (citations omitted)

The complaint filed with the MTCC alleged that petitioner had been holding the property by virtue of an expired
lease contract with the son of respondent’s predecessor-in-interest and that, despite demands made by respondent
for him to vacate the property, petitioner had "unjustifiably refused to heed [respondent’s] demand and continuously
and unlawfully occup[ied] and possess[ed] [respondent’s] property."19 Nothing could be clearer to confer jurisdiction
on the MTCC and to establish a cause of action.

While possession by tolerance is lawful, such possession becomes illegal from the moment a demand to vacate is
made by the owner and the possessor refuses to comply with such demand. 20 A person who occupies the land of
another with the latter’s tolerance or permission, without any contract between them, is necessarily bound by an
implied promise that he will vacate upon demand, failing which a summary action for ejectment is the proper remedy
against him.21

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The CA correctly ruled that petitioner’s possession from the time the property was sold to respondent was merely by
tolerance. His lawful possession was interrupted when respondent demanded that he vacate the property. His
refusal to comply with the demand made his continued possession unlawful, giving respondent the right to institute
an action for unlawful detainer. 1avvphil.net

Furthermore, it is also worthy to note that, in his motion for reconsideration of the RTC decision, petitioner explicitly
prayed that the "MTCC decision be affirmed." Since he actively participated in the proceedings before the MTCC
and in fact later sought the affirmation of its decision, he in effect recognized its jurisdiction and he should now be
estopped from questioning the jurisdiction of that court. In other words, petitioner cannot now assail the jurisdiction
of the MTCC after voluntarily submitting himself to its proceedings.22 We have held that "while lack of jurisdiction
may be assailed at any stage, a party’s active participation in the proceedings before a court without jurisdiction will
estop such party from assailing such lack of jurisdiction."23

Correctness of the Award of Attorney’s Fees

Petitioner argues that the award of attorney’s fees was improper because it was touched upon only in the dispositive
portion of the RTC decision, hence, the CA should not have merely reduced the award of attorney’s fees but should
have deleted it entirely. We agree.

The award of attorney’s fees is the exception, not the general rule. It is not sound public policy to place a penalty on
the right to litigate; nor should attorney’s fees be awarded every time a party wins a lawsuit.24 It is necessary for the
court to make express findings of facts and law that would bring the case within the exception and justify the grant of
such award.25

The CA correctly noted that the decisions of both the MTCC and the RTC do not state any factual basis for an
award of attorney’s fees. In particular, the award of attorney’s fees was mentioned only in the dispositive portion of
the RTC decision. Nonetheless, instead of deleting the award of attorney’s fees, the CA merely reduced the amount
thereof from ₱50,000 to ₱20,000 on the ground that attorney’s fees may be awarded "if the court deems it just and
equitable."

Article 2208 (11) of the Civil Code allows the recovery of counsel’s fees:

where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.

However, the conclusion must be borne out by findings of facts and law.26 The exercise of judicial discretion in the
award of attorney’s fees under Article 2208 (11) of the Civil Code demands a factual, legal or equitable justification.
Without such justification, the award is a conclusion without a premise, its basis being improperly left to speculation
and conjecture.27

The matter of attorney’s fees cannot be dealt with only in the dispositive portion of the decision. The text of the
decision must state the reason behind the award of attorney’s fees.28 Otherwise, its award is totally unjustified.

Propriety of the Issuance and Service of the Writ of Execution

Petitioner alleges that the writ of execution was implemented in violation of the Rules of Court because it was
implemented after only one working day from his receipt of a copy of the order dated December 11, 1997 (denying
his motion for reconsideration and/or suspension of the implementation of the writ of execution) instead of three
working days as provided in Rule 39, Section 10 (c) of the Rules of Court. According to him, since the
implementation of the writ was not in accordance with the Rules of Court, the sheriffs should have been cited in
contempt by the CA.

Petitioner’s error was that he counted the three days from receipt of denial of his motion for reconsideration and/or
suspension of the implementation of the writ on December 12, 1997. He should have counted it from receipt by his
wife of the copy of the writ of execution on December 3, 1997.

Under Rule 39, Section 10 (c) of the Rules of Court,29 the

writ of execution is carried out by giving the defendant notice of such writ and making a demand that the latter
vacate the property within three working days from such notice. Hence, the three-day period of implementation of
the writ of execution should be reckoned from the date petitioner was notified of the writ, that is, from December 3,
1997, the date his wife received the notice or writ.

The December 9, 1997 manifestation and motion filed by the sheriff and the December 16, 1997 sheriff’s report
state that the sheriff served a copy of the writ on the wife of the petitioner on December 3, 1997. Receipt of a copy
of the writ by petitioner’s wife in their office constituted constructive personal service on petitioner.30 Thus, the

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sheriff could have lawfully ejected petitioner from the property as early as December 8, 1997, the third working day
from notice of the writ of execution to petitioner.

Besides, in his December 4, 1997 urgent motion for time to vacate the premises, petitioner admitted that a writ had
been issued by the RTC and a copy thereof received by his wife. And in his December 8, 1997 supplemental motion
for time to vacate the property, petitioner alleged that the writ of execution issued by the trial court on December 1,
1997 "[gave] the sheriff 30 days from [petitioner’s] receipt of the writ within which to implement the same." These
incidents indubitably show that petitioner had notice of the issuance of the writ of execution within a sufficient period
before the writ was actually implemented on December 15, 1997. There was substantial compliance with the
requirement of service or notice when petitioner acquired knowledge of the writ of execution.31

Since the writ of execution was properly issued, served and implemented, there was no basis to hold the sheriffs in
contempt.

Correctness of the RTC’s July 4, 2000 Order

Petitioner also questions the July 4, 2000 order of the RTC directing the issuance of a writ to enforce the petitioner’s
civil liability as determined by the CA. Petitioner insists that it is either the MTCC where the case was originally filed
or the CA itself which should have issued the writ.

This particular issue was never brought to the attention of the CA. Moreover, a diligent search of the entire records
of this case failed to yield a copy of the alleged July 4, 2000 order. Except for the bare allegations of petitioner, there
is therefore no way to determine the nature and import of the challenged order.

WHEREFORE, the petition is hereby DENIED. The July 15, 1999 decision of the Court of Appeals in CA-G.R. SP
No. 46065 is AFFIRMED with the MODIFICATION that the award of attorney’s fees is deleted.

Costs against petitioner.

SO ORDERED.

RENATO C. CORONA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Associate Justice
Chairman

ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA

(No part)
CANCIO C. GARCIA*
Associate Justice

ATTESTATION

I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Associate Justice
Chairman, Second Division

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman’s Attestation, I hereby certify that
the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court.

ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes
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*
No Part.

1 Penned by Associate Justice Bernardo LL. Salas and concurred in by Associate Justices Cancio C. Garcia
(now Associate Justice of the Supreme Court) and Candido V. Rivera (now retired) of the Fifth Division of the
Court of Appeals.

2 Records, p. 99.

3 Records, pp. 102-103.

4 Id., p. 105.

5 Id., p. 106.

6 Id., p. 109.

7 Sheriff’s Report dated December 16, 1997; Records, pp. 165-174.

8 Rollo, p. 20.

9 G.R. No. 88632, 22 March 1993, 220 SCRA 264.

10 V Paras, Civil Code of the Philippines Annotated, 1995 ed., p. 309.

11 Development Bank of the Philippines v. Court of Appeals, 319 Phil. 447 (1995).

12 Ortiz v. Kayanan, G.R. No. L-32974, 30 July 1979, 92 SCRA 146.

13 Tacas v. Tobon, 53 Phil. 356 (1929).

14 Villasor v. Camon, 89 Phil. 404 (1951).

15 Levin v. Bass, 91 Phil. 419 (1952), cited in DBP v. Acting Register of Deeds of Nueva Ecija, UDK No. 7671,
23 June 1988, 162 SCRA 450.
16 Caviles, Jr. v. Bautista, 377 Phil. 25 (1999), citing DBP v. Acting Register of Deeds of Nueva Ecija, supra.

17 Sumulong v. Court of Appeals, G.R. No. 108817, 10 May 1994, 232 SCRA 372.

18 329 Phil. 202 (1996).

19 Records, p. 2.

20 Prieto v. Reyes, 121 Phil. 1218 (1965).

21 Yu v. de Lara, 116 Phil. 1105 (1962).

22 Spouses Benitez v. Court of Appeals, 334 Phil. 216 (1997).

23 Romualdez v. RTC, Br. 7, Tacloban City, G.R. No. 104960, 14 September 1993, 226 SCRA 408, citing
Salen v. Dinglasan, G.R. No. 59082, 28 June 1991, 198 SCRA 623 and Tijam v. Sibonghanoy, 131 Phil. 556
(1968).
24 Buan v. Camaganacan, 123 Phil. 131 (1966), citing the cases of Tan Ti v. Alvear, 26 Phil. 568 (1914) and
Jimenez v. Bucoy, 103 Phil. 40 (1958).

25 Mirasol v. de la Cruz, G.R. No. L-32552, 31 July 1978, 84 SCRA 337.

26 Buan v. Camaganacan, supra.

27 Mirasol v. de la Cruz, supra, citing Buan v. Camaganacan, supra.

28 Valiant Machinery and Metal Corporation v. NLRC, 322 Phil. 407 (1996), citing Mirasol v. de la Cruz, supra.

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29 Section 10. Execution of judgments for specific act. –

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c. Delivery or restitution of real property. – The officer shall demand of the person against whom the
judgment for the delivery or restitution of real property is rendered and all persons claiming rights under
him to peaceably vacate the property within three (3) working days, and restore possession thereof to
the judgment obligee; otherwise, the officer shall oust all such persons therefrom with the assistance, if
necessary, of appropriate peace officers, and employing such means as may be reasonably necessary
to retake possession, and place the judgment obligee in possession of such property. Any costs,
damages, rents or profits awarded by the judgment shall be satisfied in the same manner as a
judgment for money. (13a)

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30 Cf. Section 4, Rule 13, Rules of Court. Personal service may be actual, i.e., on the party himself, or
constructive. Constructive personal service may be done either by leaving a copy of the paper with the party’s
lawyer or in the office of the party or his attorney with his clerk or with a person having charge thereof, or, if no
person is found in his office or his office is not known, by leaving it in the party’s or attorney’s residence with a
person of sufficient discretion to receive the same.

31 Cf. de Los Reyes v. Ugarte, 75 Phil. 506 (1945) and Luzon Rubber and Manufacturing Company v. Estaris,
152 Phil. 341 (1973).

The Lawphil Project - Arellano Law Foundation

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